February 25, 2010

How to reduce sweatshop labor

This is unprecedented. That means the manufacturers now has to improve the payment for laborers, upgrade their workplace conditions, and/or develop new technologies that require fewer labor to meet the production target. If this trend continues, the number of sweatshops in China will inevitably decrease, without any intervention of labor unions and human rights groups.

See this is where economics come into play. The way to improve the standard of living of laborers is not by boycotting clothes made in China – that normally only does the opposite, since the sweatshop jobs are probably already the best those undereducated laborers can get. The right way is to let the “invisible hand” to adjust the market, like in the case of Pearl River manufacturing industry now. Let the workers have their say.

However it should be noted that this shortage is largely driven by the stimulus package last year. We are still not sure how the trend will continue after the effect of the package dies down.